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SRA imposes record £20,000 fine for AML failings
18 January 2023

The Solicitors Regulation Authority has fined a firm a record £20,000 for failing to have anti-money laundering training and systems in place.

The penalty is the largest the regulator has handed out since it increased its fining powers from £2,000 to £25,000 last year.

The SRA said Oxfordshire practice Ferguson Bricknell had failed to put in place a compliant firm-wide risk assessment despite declaring to the regulator that it had done so.

The fine itself is at least 10 times more than the SRA has ever issued for this type of misconduct and will send firms scurrying to check that their policies are watertight, especially given that the SRA accepted that there was no evidence of harm to consumers or third parties.

In an agreed outcome, the SRA said: ‘The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing). This could have been avoided had the firm established an adequate practice-wide (firm-wide) risk assessment.’

The two-partner firm was found to have failed to put in place a compliant AML risk assessment until 29 July 2022, despite the SRA having issued warning notices about the need to ensure this was done.

The SRA also said a declaration was made by the firm in January 2020 which stated that its risk assessment was compliant. The firm had not fully assessed its product/services risks, because it did not include the risk from its conveyancing work in the firm-wide risk assessment. The SRA said the risks associated with conveyancing and controlling client money, a significant area of work for the firm amounting to 75% of its fee income, should have been addressed on the firm-wide risk assessment but had been omitted.

It was only after the SRA’s onsite investigation that a compliant firm-wide risk assessment was put in place. The previous policy was undated and did not state the author, referred to outdated legislation and had not been regularly updated.

The firm was found to have no independent audit function established and had not provided AML training to one of its partners.

A review of files found the firm did not always check on the source of funds from third parties, had weak ongoing monitoring of transactions and failed to ensure that a form accompanying the client care letter to verify the source of funds was completed and returned.

‘It was incumbent on the firm to meet the requirements in the regulations. The firm failed to do so,’ added the SRA.

‘The agreed outcome is a proportionate outcome in the public interest because it creates a credible deterrent to others and the issuing of such a sanction signifies the risk to the public, and the legal sector, that arises when solicitors do not comply with anti-money laundering legislation and their professional regulatory rules.’

The firm assisted with the investigation and did not financially benefit from its misconduct. It agreed to pay the £20,000 fine and £1,350 costs.

Source: The Law Society Gazette, 18 January 2023

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